Tips & advice on getting your finances back on track.
So you just graduated college, congratulations! All of those years of hard work finally paid off and you now have your degree. I received my Bachelor of Arts degree two years ago and it was an exhilarating experience. It was super gratifying being able to walk across that stage knowing that I accomplished one of my dreams. After commencement is over and graduation is official, you might not have a job, but you are about to acquire a massive monthly payment: your student loans. You’re not alone; a whopping 44.7 million Americans have student loan debt.
Here are the Top 10 FAQs for those who will soon be entering the student loan payment cycle.
1. Is my loan federal or private?
Most likely, your loan is a federal loan. Federal loans are funded and regulated by the federal government. Private loans on the other hand are not organized by the government. Federal loans are more common and they are closely monitored. Federal loans are also available to pretty much anyone who is a U.S. citizen or eligible non-citizen.
To get a list of your federal student loans, go to the National Student Loan Data System website maintained by the U.S. Department of Education.
If you have a loan with a cosigner, it’s likely a private student loan. Most federal loans are not credit-based and therefore, don’t call for a cosigner. If you can’t find your loan provider, take a look at your credit report. You can get a free credit report once per year from Annualcreditreport.com. Alternatively, check with your school’s Financial Aid office. They should have a record of your loans.
2. What’s the difference between a loan servicer and a loan provider?
A student loan servicer is a third party company that manages student loans for the loan provider. They are the middleman between you and your lender. Most of your contact will be with your loan servicer. This is who you should contact when you have a question or problem with your student loan.
3. When do I have to start paying my loans?
You have a six month grace period after you graduate (or drop below a half time student status) before you have to start paying back your student loans. This window is meant to give you time to get established in a job before you start paying your debt. Note that not all private loans have a grace period, so be sure to check on your specific student loans.
You can start paying back your loans at any time. Paying down the principal during this 6 month window will benefit you in the long run with reduced interest payments and a shorter loan life.
4. How much will I need to pay?
The amount you will be required to pay each month will depend on your loans. If you have federal loans, you will receive a letter in the mail from My Federal Loan shortly after you graduate. This will tell you how much you owe every month. The standard repayment schedule is a 10 year period. You will be required to make at least the minimum payment due on your loans every month.
The standard 10 year repayment plan is the most popular plan, however, that doesn’t mean it’s automatically the right one for you. There are also plans that are tied to your income, which are more flexible if you’re not earning as much as you anticipated. This plan may take you a bit longer to repay, but will help you stay on top of your loans if your income is uncertain.
5. How do I pay my monthly payment for my loan?
Login into your Federal or Private loan servicer account to pay your bill every month or, better yet, set up automatic payments to ensure you don’t miss a monthly payment. Making your payments automatic is great because you won’t have to remember to pay your loans.
Read More: Be The Master Of Your Student Loans
6. I’m going to graduate school right after graduation, can I defer my loans?
Yes, you can defer your loans, if you are continuing your education after you graduate. You can request a deferment from your student loan provider, but keep paying your loans until you get the okay from your provider.
7. Can I pay off my student loans early?
There is no penalty for paying off your loans early. Paying more than the minimum monthly payment every month will benefit you long term. Paying as little as $10 more every month will make a difference in the life of your loan. If you get a bonus at work or other financial windfall, consider putting some or all of it directly towards your loan to significantly bring your principal down. This is some short term pain with a big long term benefit.
8. What if I can’t afford my monthly payments?
The most important thing to do is act early. If you’re having difficulty paying your loans, don’t wait until you have missed a payment or, even worse, several payments. Contact your loan servicer early.
Student loans are never discharged, even if you file for bankruptcy. You will have to pay your loans off at some point. Making a late payment can incur up to a 6% late fee. If you don’t make a payment for 90 days, you will be considered delinquent. After 9 months of no payments, you are placed in default.
If your loans are federal, the government can garnish your wages and social security benefits up to 15%. There may also be significant fees associated with missed payments putting you even further behind.
To avoid missing payments, you may be able to switch to the income-based payment plan, but only if you reach out to your loan servicer to explain that you’re having difficulty. This program adjusts your monthly payments so you will not have to pay more than 15% of your current income. Your timeline will also be adjusted from a 10 year plan to a 25 year plan.
Read More: Avoiding The Student Loan Trap
9. How can I afford my student loans when I have so many other monthly payments?
You need to create a budget for yourself post-graduation. After you graduate college you will have many other expenses on top of your student loans, such as, rent, car payments, and utility bills. Creating a monthly budget that includes your student loans will help you stay on track with all of your expenses and ensure you will not miss a student loan payment.
10. Is my student loan debt worth it?
My personal answer to this is: Yes! In 2019, getting your undergraduate degree is almost essential, if you want to thrive in your desired work setting. Your student loan debt might seem unbearable when you first graduate college and don’t have a full time job, but it will be worth it in the future. When you finally land that job in your desired field and advance in your position, you will be grateful for your undergraduate degree.
Remember, you are not alone in your student loan debt repayment. Many of your classmates have also graduated in the same position as you. Take a deep breath and try not to feel overwhelmed. You can do this!
Katherine Fatta is the Social Media Coordinator at Navicore Solutions. She creates fun and informative social media posts that engage the public.